- For the first time, a multilateral institution combines the provision of guarantees with political-risk insurance to improve sustainability.
- Operation supports the creation of the Reserva Marina Hermandad in the Galápagos Islands area.
With support from the Inter-American Development Bank (IDB) and the U.S. Development Finance Corporation (DFC), Ecuador completed a debt conversion that will allow the country to allocate resources for long-term marine conservation in the Galápagos Islands to promote greater sustainability and improve the quality of life of Ecuadorians.
To date, this is the largest debt-for-nature conversion completed in the world. The operation consists of an $85 million IDB guarantee and an $656 million DFC political-risk insurance to Ecuador to purchase existing public debt at better terms. This debt purchase with cheaper financing will generate lifetime savings of more than $1.126 billion. Besides providing the guarantee, the IDB has supported institutional strengthening policies for environmental and public-debt management in the country.
“Ecuador and the IDB are breaking ground with this debt-for-nature conversion. Not only is this the largest operation of its kind, but it is the first time that a multilateral institution is combining guarantees with political-risk insurance to mobilize resources from different actors towards conservation. It is an example of how the region is not only tackling global challenges, but is also being part of the solution – pioneering innovative approaches and instruments that can be replicated and scaled globally,” said IDB President Ilan Goldfajn.
This operation is estimated to generate savings to finance conservation activities for $323 million. These resources will be used to create the Galápagos Life Fund, which will finance conservation activities over the next 18.5 years in both the Galápagos Marine Reserve and the Reserva Marina Hermandad, an area of conservation created in the Galápagos area in 2022.
Gustavo Manrique Miranda, Ecuador's Minister of Foreign Affairs, said: “This marine reserve is special because of the participatory process involved in its creation: the government, the fishing sector, academia, and civil society, in general, joined forces to increase and strengthen mechanisms for the conservation of the extraordinary biodiversity of Galápagos. The debt-for-nature conversion is a recognition of all the work done, an example to the world of environmental protection, support for scientific research and support for production; this is true sustainable development.”
This type of operation allows countries to improve their debt management, while boosting investment in environmental sustainability and biodiversity. The operation also marks an important milestone for the IDB in its strategy to deploy innovative financing instruments to mobilize resources for sustainable development.
“This transaction supports Ecuador's efforts to achieve the Sustainable Development Goals linked to biodiversity and sustainability and targets under the Global Biodiversity Framework agreed at COP 15. It also promotes economic and social reactivation based on the conservation and sustainable use of its natural capital. The actions taken by Ecuador in this debt-for-nature conversion mark a milestone and show its commitment to building a sustainable present and future based on the participation of communities, articulated work with the productive sectors and care for the environment,” said Juan Carlos De la Hoz Vinas, IDB Representative in Ecuador.
The Reserva Marina Hermandad comprises 60,000 square kilometers of ocean between the Galápagos Marine Reserve and the Costa Rican maritime border northwest of the Galápagos Islands. This will help create a corridor of trans-national protected areas in a vitally important habitat for threatened shark species. The Galápagos Marine Reserve comprises 13 large islands in an area of 40 nautical miles. It has more than 3,500 species, 25% of which are endemic marine organisms, and 24 species of mammals, two of which are endemic. In addition to their intrinsic value, these two reserves’ natural capital is crucial for important economic sectors in Ecuador, such as tourism and artisanal fishing.
Credit Suisse acted as global lead arranger for this transaction, Oceans Finance Company served as project manager and Pew Bertarelli Ocean Legacy as cooperating partner.
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Molina Medina,Vanessa Carolina
DEBT-FOR-NATURE CONVERSION ECUADOR (GALÁPAGOS)